35th Anniversary Special: New Models in Contract Services

As pharmaceutical companies face greater cost pressure, they must decide how to best allocate resources for development and manufacturing, which entails working with contract services providers. To examine these dynamics, Pharmaceutical Technology conducted an industry roundtable to gain input on how the expectations between sponsor companies and contract service providers have and will evolve. Participating in the roundtable are: Kuljit Bhatia, vice-president of R&D, DPT Laboratories; Arnaud Hanquez, head of business development, EU Pharmaceuticals, Hospira One 2 One; Michael Kosko, president of Pfizer CentreSource; Andreas Weiler, global director of technical sales, SAFC; Derek Hennecke, president and CEO of Xcelience; and Michael Ruff, PharmD and vice-president of pharmaceutical development, and Jeffrey Basham, vice-president of business development, both at Metrics.

A decade of change

PharmTech: What have been the most significant changes in pharmaceutical outsourcing during the past 10 years,

Kosko (Pfizer CentreSource): The most significant change over the past decade has been the ever-growing acceptance of outsourcing as a core supply-chain strategy within the pharmaceutical industry. In the past, most major pharma companies felt the need to control the vast majority of their supply chains internally. As these companies have faced loss of exclusivity on patent-protected products, research productivity challenges, and capital constraints, the contract manufacturing market segment has thrived. The emergence of specialty, second tier, and virtual pharma companies has supported this developing trend. The type of outsourcing has shifted as well–away from 'transaction activity' and toward 'strategic activity.' Key factors influencing the relationship between contract service providers and their customers include supply assurance, regulatory compliance, product quality, customer service, and cost. A shortcoming in any of these areas could result in a challenging situation for the sourcing company.

Bhatia (DPT): Internal cost pressures and a dearth of blockbuster approvals have driven Big Pharma and emerging bio/pharma companies to look outside their organizations to contract pharma, but life-sciences companies have become more selective in choosing a contract provider. They are increasingly moving toward a strategic partner relationship model rather than a tactical one. In the past, Big Pharma would only outsource specific tasks of the development program to a CRO or CDMO. This resulted in increased overall cost (translational and professional), increased cycle time, and significant oversight. A strategic partnership with a 'one-stop-shop' CRO that specializes in the sponsor company's specific therapeutic area eliminated these drawbacks. This is the most significant change that has occurred in past 10 years.

Hanquez (Hospira): The change is the organic maturation of the industry for both categories of players. On one side, customers grew internal outsourcing/purchasing groups and developed skills in CMO selection. They have accumulated experience, started to use sophisticated evaluation tools, thereby making the whole CMO-selection process structured and more predictable. This level of sophistication decreases randomness of the outsourcing relationships and is a major driver of growth for top-CMOs

Providers, on the other side, started falling into two distinctive categories: CMO powerhouses, rich in experience and technical capabilities, and those who purchased one to two facilities from larger biopharma companies hoping to build a healthy CMO business while harvesting the inherited contracts. Now, many of them struggle to fill capacity and keep up with investments required to stay on the top of growing quality and compliance requirements. So, we have a duality in the market: relationships are becoming more strategic between visionary biopharma companies and preferred CMOs, but relationships with second-tier CMOs are becoming even more transactional based on the short-term customer benefit of a lower price.